US Prepares To Enforce 45 FATCA Pacts

by Mike Godfrey, Tax-News.com, Washington

04 April 2014

The United States Department of the Treasury and the Internal Revenue Service
(IRS) have announced that foreign jurisdictions that have reached agreement
on the terms of intergovernmental agreements (IGAs) under the Foreign Account
Tax Compliance Act (FATCA) can be treated as having such agreements in effect
until the end of 2014.

This treatment will be available to jurisdictions that have reached agreements
in substance prior to July 1, 2014, and that consent to having the status of
their agreements disclosed. After December 31, 2014, only signed IGAs will be
considered to be in effect.

As an increasing number of jurisdictions reach agreements in substance, the
announcement provides foreign financial institutions (FFIs) located in these
jurisdictions with the guidance they need prior to the upcoming registration
deadlines.

In addition, as part of the effort to facilitate an effective start of FATCA
withholding on July 1, 2014, it has also been announced that FFIs will be allowed
ten more days to register and ensure that they will be included on the first
IRS FFI list, if they submit a complete registration form by May 5, 2014, instead
of April 25, 2014, as originally announced. The IRS stated that it can provide this
extra time based on its assessment of the performance of its registration system
to date.

It was disclosed that, to date, the US has signed 26 IGAs, and the announcement
provides that 19 additional jurisdictions will now be treated as having IGAs
in effect. That would bring the total number of jurisdictions that are treated
as having IGAs in effect to 45.

This list is expected to continue to grow in the coming weeks as additional
countries provide consent to having the status of their IGAs disclosed, and additional
agreements in substance are reached.

"With 45 countries now considered to have IGAs in effect, and more jurisdictions
far along in the process, today's announcement provides crucial clarity for
financial institutions as they prepare to comply with FATCA starting on July
1," said Deputy Assistant Secretary for International Tax Affairs Robert
Stack.

Congress enacted FATCA in 2010 to target non-compliance by US taxpayers using
foreign accounts. It requires US financial institutions to withhold 30 percent
of certain payments made to FFIs that do not agree to identify and report information
on US account holders. Foreign Governments have two options for complying with
FATCA: they can either permit their FFIs to enter into agreements with the IRS,
or they can themselves enter into IGAs with the US.

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